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Huntington Ingalls (HII) Wins $113.6M Contract for LHA 9 Ship

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Huntington Ingalls Industries, Inc.’s HII business unit, Ingalls Shipbuilding, recently clinched a modification contract to allow long-lead-time material and advance procurement activities for LHA 9 Ship. The U.S. Navy contract reflects its sustained commitment to the ship.

Details of the Deal

Valued at $113.6 million, the modification contract takes the total advance funding for LHA 9 to $651 million for Huntington Ingalls. It is worth mentioning that Huntington Ingalls LHAs are an integral part of Navy amphibious assault ship groups and Marine Corps air ground task forces.

Huntington Ingalls’ Position in Shipbuilding

Huntington Ingalls business unit enjoys a dominant position in the global naval shipbuilding market backed by its expertise in designing and manufacturing of non-nuclear ships, which primarily constitute amphibious assault ships, expeditionary warfare ships, surface combatants and dock ships, for the U.S. Navy and U.S. Coast Guard.

Huntington Ingalls is currently the only builder of large deck amphibious assault ships and expeditionary warfare ships for the U.S. Navy, including LHAs and LPDs. It is imperative to mention that Huntington Ingalls may continue to clinch contracts from the Pentagon, for naval ships, thus bolstering its revenues from the shipbuilding segment.

The United States, which is the largest exporter of military weaponries worldwide, is focused on strengthening its military resources. This is quite evident from the allotment of a $715 billion investment plan, in the U.S. fiscal 2022 defense budget. In fact, in July, the Biden administration issued a document, which highlighted the inclusion of an amphibious fleet of 48 to 63 amphibious ships, including eight to nine LHA/LHD-type ships, 16 to 19 LPD-type ships, and 24 to 35 LAWs. So, we anticipate a solid flow of new and modification contracts from the Pentagon involving naval ships. The latest deal is a testament to that.

Global Growth Prospects

Looking ahead, the global naval shipbuilding market is expected to witness a CAGR of 4% to $167 billion by 2026 as estimated by a Mordor Intelligence report. This, in turn, is likely to provide a good platform for a shipbuilding manufacturer like Huntington Ingalls to win more contracts going forward.

Such growth prospects will benefit Huntington Ingalls as well as other shipbuilders like General Dynamics GD, Mitsubishi Heavy Industries MHVYF and BAE Systems BAESY.

General Dynamic’s NASSCO unit has been designing, building, and repairing ships since 1960. In November, General Dynamics NASSCO launched the future USNS Harvey Milk (T-AO 206) — the second ship for the U.S. Navy’s John Lewis-class fleet oiler program.

General Dynamic delivered an earnings surprise of 3.37% in the last reported quarter. It surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed once, the average surprise being 3.15%. The Zacks Consensus Estimate for General Dynamic has been revised upward by 0.4% in the last 60 days to $11.53 per share. The shares of General Dynamic have appreciated 30.9% in the last one year.

Mitsubishi Heavy Industries specializes in building naval ships and maritime systems. The company provides after-sales service for destroyers and submarines, the symbols of maritime operation.

Mitsubishi Heavy Industries delivered a negative earnings surprise of 104.65% in the last reported quarter. The Zacks Consensus Estimate for the company has increased 2.6% to $2.74 in the last 60 days. Mitsubishi Heavy Industries shares have returned 30.9% in the last one year.

Bae Systems designs and manufactures naval ships and submarines, as well as their state-of-the-art combat systems and equipment. In September 2021, BAE Systems secured a five-year Systems Engineering and Integration Support Services contract worth up to $478 million, to continue supporting the U.S. Navy Strategic Systems Programs (SSP) office.

The long-term earnings growth rate estimate for the company is pegged at 4.8%. Shares of Bae Systems have returned 7.5% in the last one year.

Price Movement

In a year’s time, shares of Huntington Ingalls have gained 11.9% against the industry’s decline of 28.7%.

Zacks Investment Research
Zacks Investment Research

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Zacks Rank

Huntington Ingalls currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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General Dynamics Corporation (GD) : Free Stock Analysis Report

Bae Systems PLC (BAESY) : Free Stock Analysis Report

Huntington Ingalls Industries, Inc. (HII) : Free Stock Analysis Report

Mitsubishi Heavy Industries, Ltd. (MHVYF) : Free Stock Analysis Report

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